Tax amnesty programs give those who have unpaid taxes the opportunity to pay off their debt at a fraction of the price, usually in the form of penalty and interest waivers.
Pennsylvania's tax amnesty program runs from April 26, 2010 to June 18, 2010.
What Are the Benefits of Amnesty?
During their 54-day amnesty program, the Pennsylvania Department of Revenue will waive all late filing penalties and one-half of the interest for anyone who pays their delinquent state taxes and files the necessary documents with the state.
In addition, if you are fully compliant with the amnesty program, any “unknown liabilities” (unfiled returns or underreported tax amounts that the department is unaware of) will be waived for amounts due prior to July 1, 2004.
Who is Eligible for Tax Amnesty in Pennsylvania?
All taxes owed to the state of Pennsylvania and administered by the Pennsylvania Department of Revenue are eligible for amnesty, from individual and business taxes to miscellaneous taxes such as fuel and cigarette taxes (click here for a complete list of taxes covered). Your delinquent tax debts must have been incurred by June 30, 2009 or earlier.
Tax returns or reports that were not filed, and unpaid and under-reported taxes are eligible. The amnesty program does not include city or county taxes, penalties, or interest with the exception of Local Sales and Use and Hotel Occupancy Taxes for Philadelphia and Allegheny County only.
In order to participate in the amnesty program you may not:
- Be currently under investigation for an alleged violation of tax law
- Have been a defendant, prior to the amnesty period, in a criminal complaint alleging a violation a tax law that is administered by the PA Department of Revenue
- Be a current defendant in a pending criminal action for an alleged violation of any tax law covered under amnesty
How to Obtain Amnesty
In order to obtain amnesty under Pennsylvania's tax amnesty program you have to:
- Electronically file an Amnesty Return, which will be available online at the PA Department of Revenue's website
- Pay all taxes and one-half of the interest due according to the Amnesty Return that is filed
- File complete tax returns for all periods in which you failed to file a return previously
- File complete amended tax returns for all tax periods in which tax liability was underreported
- Submit all returns by the end of the amnesty period (June 18, 2010). No extensions will be granted.
When you apply for amnesty you:
- Agree to give up our right to protest or pursue an appeal regarding Amnesty Returns filed under the amnesty program
- Cannot receive a refund of any amounts paid under the amnesty program
- Must withdraw any pending administrative or judicial appeal for the returns included in the amnesty filing
- Will not be able to apply for future tax amnesty programs
Tax return forms can be obtained from Forms and Publications Section of the PA Department of Revenue's website.
For your own protection, you should keep proof of payment, such as a bank account statement, credit card statement, or cancelled check. You should also keep copies of everything you submitted, along with proof of payment and mailing, for at least three years.
What If I Become Delinquent in the Future?
Amnesty is not a get-out-of-jail-free card. The state can re-impose all penalties and interest that was waived during the amnesty period if you become delinquent again within two years following the amnesty period.
Watch Out for the Non-Participation Penalty
At the end of the Amnesty Period, anyone who is eligible for Pennsylvania tax amnesty and does not apply will be subject to a 5% non-participation penalty. This penalty will be added to all tax, penalty and interest that was not paid in full during the amnesty period.
Those who have existing deferred payment plans, are involved in an active appeal, and those in bankruptcy will not be assessed the additional 5% non-participation penalty.
Can I File for Amnesty If I Already Have a Payment Agreement?
If you are currently paying payments under a deferred payment plan with the PA Department of Revenue, you are still eligible to participate in the amnesty program. However, you will not receive a refund or credit for penalties and interest that have already been paid.
Financial Hardship and Amnesty Payments
Under the Pennsylvania amnesty program, if making a single payment would be a serious financial hardship you may be allowed to make payments.
If you would like to claim financial hardship it is best to do so in writing. This will ensure that it is properly recorded by the state and will provide you with written evidence of your hardship claim. If a hardship option is not included on the Amnesty Return, write a letter.
Should I File for Amnesty?
More than likely, you are going to be much better off if you participate in the amnesty program, especially considering the 5% non-participation penalty, not to mention the savings in interest and penalties.
Another thing to consider is the possibility of the state putting a lien on your assets, and ultimately seizing them, in order to satisfy your tax debt. Not only could this be financially devastating, but would also destroy your credit.
The only situation in which you might consider not applying for amnesty is if you have actual evidence that you do not owe the tax and any attorney or CPA fees associated with fighting the tax assessment would be minimal. However, in this case you still run the risk of losing and being stuck with the full tax bill.